Quick Facts

Saint Vincent and the Grenadines continues to perform comparatively well in rule of law and regulatory efficiency. Benefitting from a relatively well-developed legal and commercial infrastructure, tourism has attracted considerable foreign investment over the past decade.

Economic Freedom Snapshot

2016 Economic Freedom Score: 68.8 (up 0.8 point)

Economic Freedom Status: Moderately Free

Global Ranking: 40th

Regional Ranking: 5th in the South and Central America/Caribbean Region

Notable Successes: Rule of Law and Regulatory Efficiency

Concerns: Management of Public Finance and Open Markets

Overall Score Change Since 2012: +2.3

Open-market policies are not firmly institutionalized. Tariff and non-tariff barriers undercut engagement in global commerce, and the investment regime lacks efficiency. The lack of long-term financing mechanisms continues to undermine economic development beyond tourism and agriculture. Despite some progress, management of public finance remains poor, and public debt remains over 70 percent of GDP.

Background

Saint Vincent and the Grenadines is a parliamentary democracy. Prime Minister Ralph Gonsalves of the Unity Labour Party has been in office since 2001 and won a new mandate in elections held in December 2015. The country is a member of the Caribbean Community (CARICOM); the Venezuela-led Bolivarian Alliance for the Peoples of Our America (ALBA); and the Organization of Eastern Caribbean States. Exports benefit from the Caribbean Basin Initiative, which provides duty-free access to the U.S. market. Agriculture and tourism employ a significant portion of the workforce, but formal-sector unemployment is high. Public debt is now more than two-thirds of GDP, and tourism and construction have not recovered fully from the 2008 financial crisis.

The rule of law remains strong, and corruption is not pervasive. There have been some allegations of money laundering through Saint Vincent banks and drug-related corruption within the government and police, but the government has taken action to prosecute such crimes. Saint Vincent and the Grenadines’ relatively independent and efficient judicial system is based on British common law.

The top personal income and corporate tax rates are 32.5 percent. Other taxes include a property tax and a value-added tax. The overall tax burden equals 21.7 percent of total domestic income. Government spending amounts to 31.8 percent of GDP. With the budget running a deficit, public debt has climbed to over 70 percent of GDP. State finances have been constrained by lower-than-expected tax revenues.

Launching a business is not time-consuming, although licensing requirements remain burdensome. Modern bankruptcy procedures are not in place. Labor regulations are relatively flexible, but their application is uneven. According to the IMF, transfers and subsidies have increased in recent years due to the establishment of new state-owned enterprises created out of what had been entities within central government departments.

Saint Vincent and the Grenadines’ average tariff rate is 12.3 percent. The country is a member of the World Trade Organization, the Organization of Eastern Caribbean States, and the Caribbean Community and Common Market. The developing financial system is dominated by banks. Credit access by the private sector has been expanding slowly, but a rise in the number of non-performing loans deters new lending.